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How to Encourage Customer Loyalty in Your Small Business and Why It’s Critical to Your Success!
You’ve probably heard the adage that “keeping an old customer is cheaper than converting a new one.” But just how much cheaper is it? According to survey data presented in the new SCORE Infographic out this month, securing a new customer is six to seven times more expensive than keeping an existing one. And loyal customers are worth up to 10 times the amount of their first purchase! Given these findings, it becomes obvious that customer loyalty is a worthwhile goal for your business to aspire, not only for marketing and branding reasons, but because of its impact on the bottom line as well.
If you’ve ever wondered how much of an impact customer loyalty really makes to a small business, check out the infographic, “Customer Loyalty: Winning Them Over is the Key to Growth” for the full visual rundown in terms of real dollars and cents.
Since it’s clear that customer loyalty is imperative to your enterprise’s success, let’s further explore the options and techniques others have used to cultivate strong customer devotion. The experts at the SBA recently offered “4 Tips for Customer Loyalty Programs” including:
· Loyalty Punch Cards
· Opt-In Programs
· Digital Days
But, the SBA warns, “there’s no ‘one size fits all’ approach for all businesses. Observe customer trends and listen to what they say so you’ll be able to think of ways to make your incentives and rewards as unique as your business.”
Check out the full blog post to learn how to best employ these tactics and how to determine what is really important to and impactful on your specific customer base.
Tips to Employ Everyday
Seasoned SCORE mentor Stephen Engelhardt recently shared his “Expert Tips for Sales and Customer Loyalty” in which he discusses how to embrace the sales process as a small business owner and how to foster a long-term relationship with your clients and customers. Stephen addresses the hard questions such as:
· How can you turn a problem or complaint into an opportunity to win over or win back a customer?
· What are some simple ways to build customer loyalty so that they’ll keep coming back and hopefully spread the word about your small business?
· Should you be up front about wanting to do more for customers, or is a more subtle approach better?
He shares experienced advice like, “I made thousands of dollars in sales from problem clients because I read their mindset and what was needed to make them happy.” Read the interview for all of Stephen’s expert insights gained as a business owner and a SCORE mentor.
Boosting Customer Loyalty with Big Data
Finally, like most aspects of your business, it’s important to periodically take a step back and survey your internal statistics regarding customer loyalty to evaluate trends and see what can be improved.
"Customer data gives businesses, especially smaller ones, a great opportunity to reward customers with loyalty programs that pay attention to their specific purchase preferences," said Tyler Roye, CEO and co-founder of e-gift card retailer eGifter. "[This can] include products purchased, channels viewed and purchased through, and even currencies used to purchase. Drilling down in those specific areas allows businesses to offer the most-enticing deals and programs for customers, not only making them more likely to spend with the business, but also making them feel valued as individuals."
In her article on the topic, Nicole Fallon, Assistant Editor of Business News Daily, suggests two places to focus your data collection relative to customer loyalty: social network analysis and cross-IT integration.
You may have noticed that all of these experts have agreed upon the fact that knowing a customer’s needs and catering to them wins you their trust and repeat business. Knowledge is power and having that knowledge specific to your target customer may be the key to generating up to 10 times more revenue in your small business. Worth the investment, no? If you’re getting stuck on new incentives to offer your customers or how to delve deeper into analyzing your current tactics, tap into the knowledge and experience of a SCORE mentor who has been there and done that. Connect with a SCORE mentor online or at a local chapter today!
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District Office Lending Chart
7(a) Loan Guaranty Program
|Lender Name||7a Number of Loans||7a Loan Amount|
|JP MORGAN CHASE BANK, N.A.||170||25,291,800|
|VILLAGE BANK AND TRUST||54||20,726,700|
|Wells Fargo Bank||32||13,206,900|
|Live Oak Banking Company||16||10,875,300|
|Celtic Bank Corporation||24||9,946,200|
|First Mid-Illinois Bank & Trust||36||6,962,800|
|Fifth Third Bank||15||4,854,600|
|PNC Bank, NA||19||4,056,900|
CDC/504 Loan Program
|Lender Name||CDC/504 Number of Loans||CDC/504 Loan Amount|
|SMALL BUS. GROWTH CORP||72||46,960,000|
|SOMERCOR 504, INC.||42||28,459,000|
|WESSEX 504 CORPORATION||16||7,941,000|
|ROCKFORD LOCAL DEVEL CORP||8||3,877,000|
|REGIONAL DEVELOPMENT COMPANY||1||1,891,000|
|ILLINOIS BUS. FINAN SERVICES||4||1,398,000|
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5 Reasons Your Business Credit Scores Don’t Get You the Credit You Need
When you apply for a new credit line or request a credit limit increase for your business, suppliers, creditors and lenders want to see how your company has handled its existing credit obligations in the past. This enables them to determine if they should approve your request and to help determine what terms they should offer.
Lenders often use business credit scores to help them assess the level of risk a company presents. Business credit scores are calculated based on the information in a company’s credit report. In most cases, higher business credit scores mean lower risk to a lender when extending credit to a business.
Your business credit scores are calculated by a statistically derived algorithm, designed to calculate risk based on a variety of factors. Although each business credit reporting agency has its own unique scoring models, scores and ratings, other types of information – such as financials, payment history and credit diversity – all play a role in the strength of your business credit reports and scores.
Here are five reasons that may prevent your business from getting the credit it needs:
1) A weak or incomplete business credit profile – The report and demographics of a company play an important role in how creditors assess creditworthiness. A business with issues such as poor financials, outdated registrations or high-risk industry classification codes can trigger a denial of credit or unfavorable credit terms. So it's vital that your company’s documents, financials, filings, and registrations are complete, accurate and up to date.
2) Limited or negative payment history – Your payment track record demonstrates how well your company handles its current and past credit obligations. A company with limited or negative payment history will have a difficult time getting credit.
Aside from paying invoices in a timely manner, keep your credit usage consistent. Regular purchases and timely payments are what establish a positive payment history; it’s what lenders want to see.
3) Low credit limits – Low credit limits across multiple accounts plainly reveal to creditors that a business has limited credit capacity. However, a business with high credit limits reveals that it has the ability to handle large credit obligations. As a result, a business will receive much larger credit limit recommendations, especially if the company has low revolving debts. If your company has a positive payment track record with an existing supplier or creditor, it may be in your company’s best interest to request a credit limit increase.
4) High credit utilization ratio – While the size of credit limits reveal what amount of credit your creditors are willing to extend to your company, credit utilization ratios show how well your business manages it. Creditors view a high credit utilization ratio as a business with excessive debt with a greater risk of default.
Keep credit utilization ratios at 50% or below to avoid falling into this high risk category. Low credit utilization is a clear indication that your business can handle its credit obligations. Doing so will ultimately benefit you during the credit application process.
5) Lack of credit diversity – The types of trade lines your business has reporting play a substantial role in the credit granting process. Limited credit diversity may limit your company’s ability to qualify for certain types of funding. Having short term financing, revolving accounts, installment loans and open accounts reveals to creditors that your company can manage various types of credit responsibly.
Bear in mind your business credit scores will certainly have the tendency to fluctuate with each business credit agency, so it's vital to monitor your business credit profiles on a regular basis. While business credit reports and scores are an essential tool for lenders, suppliers and creditors to assess credit risk; other factors such as banking history, revenues and personal credit scores may play a larger role if a business lacks depth, diversity and density in its files.
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